MexECON Blog

February CPI Rises 3.9 Percent YOY

In a report on Thursday, Mexico's February consumer price index (CPI) was up 3.9% from the same month one year earlier.  That was slightly better than the year-over-year increase of 4.0% in January, and it marked the first decline in inflation after four straight months of acceleration.  According to the report, from the official statistics agency INEGI, the pullback in inflation in February came mostly from easing prices for food products such as tomatoes, lemons, onions, and eggs.  Excluding fresh foods, energy, and administratively-determined prices, the February "core" CPI was up 3.4% year-over-year, after an increase of 3.3% in January.

At the wholesale level, inflation fell sharply, but it remained much higher than at the retail level.  The February producer price index (PPI) was up 5.6% year-over-year, after readings of 6.4% in January and 6.6% in both December and November.

Comment:  Starting this month, I begin using the PPI for all final goods and services instead of the PPI for final goods only.  The broader series has a shorter history than the narrower one, but I have decided that it is long enough to rely on.  The broader series is also more comparable with the CPI, which also covers both goods and services.

Producer inflation using the PPI for all final goods and services is somewhat lower than indicated by the series for goods only, but it is still significantly higher than consumer inflation.  Therefore, it seems likely that Mexican producers will keep trying to pass their increased costs on to consumers, driving up consumer inflation.  The acceleration in core consumer inflation in February also points to continued price pressures.  Against this backdrop, Banco de México will probably hold interest rates steady in the coming months, instead of cutting them as many observers expected last fall.  The increased likelihood of stable interest will probably put added upward pressure on the value of the peso.

Patrick Fearon, CFA
Vice President, Fund Management

CPI 1202

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